Over the course of the last several years, corporations have faced the threat of cyber risk and the occurrence of cybersecurity incidents with more and more frequency. As a result, public companies have begun to report cyber risks and cyber incidents in their public filings, but the specifics of what should be disclosed has been predominately left for each individual company to decide.
The SEC's Division of Corporation Finance has now put out guidance on what should be included in disclosures concerning cyber security risks and incidents. While this guidance does not have the effect of law, it is a strong indication of how the SEC will proceed internally and what is expected in a public company's reporting. The theory behind the guidance is that the federal securities laws are designed to elicit disclosure of timely, comprehensive, and accurate information about risks and events that a reasonable investor would consider important to an investment decision. With those thoughts in mind, the SEC guidance is intended to help inform registrants as to what should be disclosed so that an investor can make an informed decision.
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